In the legal sense, a trust is an agreement where a settlor or a grantor transfers ownership of property or an asset to another party for care and holding. The asset being held is the principal, and the person overseeing it is the trustee. A beneficiary is anyone who gains something from the assets that the trustee manages. In some circumstances, the beneficiary is also the grantor, whereas, in others, the beneficiary is a different individual.
A land trust can be either revocable or irrevocable, just like any other kind of trust. Irrevocable trusts cannot be amended without the beneficiary’s consent. Typically, these trusts are used for charitable, gifting, or inheritance purposes. On the other hand, a revocable trust still enables the grantor to take charge of the asset, meaning it can change or even revoke its terms.
Land Trusts Types
The two main categories of land trusts are conservation and title-holding trusts. Using title-holding trusts enables anonymous land ownership by both entities. The owner of a conservation land trust must give up some rights to development and land use, which is a significant difference.
Title Holding Land Trust
With a title-holding trust, the property owner can manage the land trust’s functions while maintaining complete property ownership. Because they were first made well-known in Chicago in the 1800s, these trusts are also frequently called “Illinois land trusts.” A legal framework for title-holding land trusts does not exist in all 50 states. Most states follow Illinois land trust laws if they don’t have their own.
Conservation Land Trust
The landlord must forfeit some control over the property’s usage and expansion to form a conservation land trust. Such trust safeguards natural resources, wildlife, and cultural or historical sites from expansions that could disrupt them or result in pollution.
A conservation land trust automatically acquires land title only if the property is completely donated. Instead, a landowner may enter into a binding contract known as a conservation easement and “donate” their land development rights to the trust. The trust is responsible for overseeing the enforcement of the easement and, in some cases, for managing the property.
Benefits of Land Trusts
Given below is a list of benefits of land trusts for property owners:
- Land trusts may reduce your tax burden – You cannot altogether avoid paying taxes with a land trust. However, it provides some tax advantages that may lower your tax liability.
- With land trusts, you can maintain anonymity – Real estate controlled as a land trust will be listed in public records under the trustee’s name, not yours. By keeping your anonymity, you can avoid interruptions and unwanted solicitations. Additionally, it can shield you from those with ill motives, like opportunists.
- Land trusts can prevent liability – When you purchase a plot of land, the transaction and the price you paid are entered into public records. A land trust will shield your landed assets from prying eyes by keeping your worth a secret.
- A land trust can shield specific financial data from the public eye – This anonymity can help you gain leverage. Hiding your total wealth or the sale prices you paid for another real estate can be helpful when negotiating a deal.
There is much to learn about what a land trust is. States have different laws, and those laws are subject to change. It is advised to seek legal advice from a firm with knowledge and experience with land trusts if you consider using them for your investment properties.
